- Three US lawmakers have raised concerns about theft, money laundering and terrorism financing within crypto exchanges
- Binance could face an ‘epic bank run’, claimed John Reed Stark, a former SEC lawyer
Last week, three US lawmakers raised concerns that Binance, the world’s largest crypto exchange, has allegedly facilitated theft, money laundering and terrorist financing. In response, Binance dismissed, but did not directly refute, the legislator’s concerns.
Senators Elizabeth Warren (D-Mass.), Chris Van Hollen (D-Md.), and Roger Marshall (R-Kan.) asked for financial information, including balance sheets since 2017. Also all documents related to a reported 2018 plan to distracting regulators with a feigned interest in compliance. According to the senators
“The little information available to the public about Binance’s finances suggests that the exchange is a hotbed of illicit financial activity that has facilitated more than $10 billion in payments to criminals and sanctions evaders.”
In fact, the senators also compared Binance’s actions to those of crippled rival exchange FTX.
The letter was addressed to Binance CEO Changpeng Zhao and Brian Shroder, head of US subsidiary Binance.US.
“We protect our users, we protect our customers, we do everything everyone preaches,” Zhao replied in an Twitter spaces session held last week.
In addition, according to a recent Forbes report, Binance, like FTX, has transferred $1.8 billion in collateral to support customers’ stablecoins. In doing so, the exchange also distributed the money to several major investors, Forbes added. Zhao, for his part, however, refuted the progress.
At the time, an anonymous Binance.US spokesperson told Forbes that the company is confident in the strength of its operations. This, including compliance with anti-money laundering (AML) rules. In addition, the company maintains 1:1 reserves and never trades or lends money from customers, the spokesperson added.
Binance could face an ‘epic bank run’
However, concerns about Binance’s activities are not limited to regulators and media outlets alone.
According to John Reed Stark, a former attorney for the US Securities and Exchange Commission (SEC), Binance could face an “epic bank run”. Binance, according to to Stark, is a “shadow bank” that mints its own counterfeit currency while offering a variety of financial services without oversight or audit from the US regulator.
Binance, Stark claimed, is not subject to the same rules as traditional banks and does not hold deposits in the same way. Customers would be cut off if withdrawals are suspended and they could become unsecured creditors, Stark warned.
Matt Senter, CTO of Bitcoin rewards app Lolli, on the other hand, believes that Binance is unlikely to leave the United States.
“Binance would be forsaking its position as a leader in the crypto industry by leaving the US and seizing a huge economic opportunity to reach a capital-intensive US user base.”
While many think Binance is too big to fail, there are plenty of crypto skeptics who don’t put their trust in Binance, especially after the FTX debacle.